Luhrmann, an Australian, had also considered filming in New York, the setting of the novel, but New South Wales Premier Kristina Keneally said Sydney finally won out on the Warner Bros-backed blockbuster.

"What better endorsement of our state's world-class film making capabilities, we've won (the) right to produce this iconic New York story ahead of New York itself," said Keneally.

"The Great Gatsby will be a boon for the NSW film industry, particularly given Baz Luhrmann's commitment to maximising use of local cast, crew and visual effects expertise."

Keneally said the movie would be based at Sydney's Fox Studios and pre-production would begin in March.

The project would bring more than Aus$120 million (US$121.7) into the local economy and create hundreds of jobs, she added.

"This comes at a good time for the film industry," Keneally said.

"Australia was thought to be losing international filmmaking due to the strong Aussie dollar. Put simply, this is a big win."

Fitzgerald's 1920s classic has had several screen incarnations, the most famous of which was released in 1974 and starred Robert Redford and Mia Farrow.